Beyond Redemption? Court Refusal to Convene Scheme Meetings

The recent decision of the Supreme Court of New South Wales in Re Capel Finance Ltd [2005] NSWSC 286 serves as a salient reminder to those involved in the preparation of members’ schemes of arrangement that the discretion of the court under section 411(1) of the Corporations Act is real—and not to be taken lightly.

Background

The applicant in that case applied for orders for the convening of a meeting of its shareholders to consider a proposed arrangement between the company and its shareholders.

The proposed arrangement involved a specific capital reduction through the cancellation of all existing ordinary shares other than those held by two nominated members. The ordinary shares other than the excluded shares of the two named shareholders were referred to as the ‘scheme shares’ and the holders of those shares as the ‘scheme shareholders’.